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Rachel Reeves has announced increases in stamp duty rise and capital gains tax as part of tax hikes that will raise an eye-watering £40bn in her historic first Budget.
Launching an attack on previous Tory governments, the chancellor said Labour had inherited a £22bn “black hole”, and would never again “allow a government to play fast and loose with public finances.
After months spent warning the public of “tough choices” ahead, Ms Reeves promised to “invest, invest, invest” in order to “fix public services”.
Increases to employers’ national insurance contributions, stamp duty on second homes and a scrapping of VAT exemption on private schools fees were all confirmed by the chancellor, as well as a new duty on vaping liquids.
However, there were surprise announcements that the freeze on income tax thresholds, often described as a “stealth tax”, would not be extended past 2028, while Ms Reeves has also decided against a hike in fuel duty.
Responding to the Budget, Rishi Sunak accused Ms Reeves of “fiddling the figures” and criticised the government for embarking on an “enormous borrowing spree”.
Watch live: Office for Budget Responsibility responds to Rachel Reeves’ £40bn tax hikes
Budget averts 36% fall in net public investment, IPPR analyst says
Rachel Reeves’ Budget will keep investment in the public sector roughly stable over the course of this parliament, according to Carsten Jung, head of macroeconomics at the IPPR think-tank.
The new plans contrast with a 36 per cent fall under the previous Tory government’s plans, Mr Jung said.
What impact will Budget have on rail travel costs?
Regulated train fares in England will increase by up to 4.6 per cent next year and the price of most railcards – excluding the discount mechanism for disabled passengers – will rise by £5, Rachel Reeves announced in her Budget.
The increase in fares is one percentage point above July’s Retail Prices Index (RPI) measure of inflation, which until 2023 was used by Westminster governments to set the cap on annual rises in regulated fares.
But a Budget document published by the Treasury stated that the 4.6 per cent rise will be “the lowest absolute increase in three years”, with fare changes to come into force in March.
Pound strengthens slightly after Budget, but FTSE remains in the red
The pound has strengthened following Rachel Reeves’ Budget – although the FTSE 100 Index remained in the red.
Sterling, which was down 0.4 per cent against both the US dollar and euro prior to the Budget – later stood 0.2 per cent higher at $1.303 dollars and 0.1 per cent lower at €1.201.
However, London’s FTSE 100 Index fell 0.6 per cent.
Budget sets Britain ‘on path towards national renewal’, says TUC
The Trades Union Congress has hailed Rachel Reeves’ first Budget as a “vital first step towards repairing and rebuilding Britain”, but warned that “there is still a lot more work to do to clean up 14 years of Tory mess and economic decline.
TUC chief Paul Nowak said: “The chancellor was dealt a terrible hand by the last Conservative government – a toxic legacy of economic chaos, falling living standards and broken public services. But with today’s budget the Chancellor has acted decisively to deliver an economy that works for working people.
“The government’s investment plans are a vital first step towards repairing and rebuilding Britain – securing the stronger growth, higher wages and decent public services that the country desperately needs.
“Tax rises will ensure much-needed funds for our NHS, schools and the rest of our crumbling public services, with those who have the broadest shoulders paying a fairer share. The chancellor was right to prioritise hospitals and classrooms over private jets.
“There is still a lot more work to do to clean up 14 years of Tory mess and economic decline – including better supporting and strengthening our social security system. But this budget sets us on an urgently needed path towards national renewal.”
Watch: Rachel Reeves mocks Rishi Sunak with private jet announcement
Sunak accuses Reeves of ‘tidal wave of anti-business regulations’
Rishi Sunak has accused the chancellor of “delivering a tidal wave of anti-business regulations” and claimed the Labour Party is led by people “who have no experience of business”.
The former prime minister told the Commons: “Today, the OBR has forecast growth is going to be lower under this government than it was forecast to be under the Conservatives, that’s the change they have brought.
“This is what happens when the Labour Party is led by people who have no experience of business. Relentlessly talking down our economy, delivering a tidal wave of anti-business regulations, destroying our flexible labour market, and raising taxes to the highest level in our country’s history.
“It’s a classic Labour agenda – higher taxes, higher borrowing, no plan for growth and working people paying the price.”
Watch: Rachel Reeves pledges unprecedented NHS funding boost to transform healthcare
Sunak claims pensioners have been ‘squeezed’ in Budget
Rishi Sunak has warned that Britain’s poorest pensioners have been “squeezed” in the Budget.
He told the Commons: “Britain’s poorest pensioners squeezed, welfare spending out of control and a streak of tax rises they promised the working people of this country they would not do.
The former prime minister said: “National insurance, up. Capital gains tax, up. Inheritance tax, up. Energy taxes, up. Business rates, up. First-time buyer stamp duty, up. Pensions tax, up. They have fiddled the figures.”
How will the employer National Insurance rise affect you?
Rachel Reeves has confirmed that employer national insurance contributions (NICs) will rise following an announcement at Labour’s first Budget.
The measure has caused strong political debate, focused on whether it would break Labour’s manifesto pledge to not raise taxes on “working people.”
Ministers and Treasury officials have indicated the government’s position is that the measure would not break their manifesto pledge. Meanwhile, Institute for Fiscal Studies director Paul Johnson has argued it would be a “straightforward breach.”
Here are the facts about the debate and how the measure could affect you:
